The Importance of Non-labor Income: An Analysis of Socioeconomic Performance in Western Counties by Type of Non-labor Income

Non-labor income (NLI) is one of the largest and fastest growing sources of income, constituting more than one-third of personal income in the U.S. West. Given the unprecedented growth in NLI and its diverse make-up, which includes investment income, Social Security, Medicare and Medicaid, and welfare, it is worth asking what effect the different types of NLI have on local economies and social well-being. We classify NLI into payments associated with investments, aging, and economic hardship, and then we use an empirical approach to evaluate the relationships between these NLI types and socioeconomic performance in western counties. We find that the NLI types accruing in the West are concentrated in rural counties and are associated with predictable, and in many cases undesirable, socioeconomic characteristics. Policies and demographic trends that affect the disbursement of NLI (e.g., aging baby boomers and reforms to retirement, income maintenance, and medical benefits) will have widespread effects, particularly in the rural West.